We’re glad that got your attention. We’re just not convinced that it will happen. Yet, we received an industry alert to that effect. Allegedly, a new law in China (for which we can find no public reference) goes into effect January 1, 2016 banning “unqualified” petcoke.
So what? you might say. Well, petcoke is a necessary raw material in aluminum production.
But before we move to the point of hysteria our readers might find it helpful to understand the quick criteria we deploy in determining whether or not we’ll publish something forwarded to us:
- Does the news item have the potential to impact one of the metal markets we cover?
- What is the likely order of magnitude of said news item?
- Do we think this will have any impact on the underlying metals price? And if so, in what direction?
A set of criteria that seems relatively straightforward to us right?
Why This Law Might Not Matter
Even ThomsonReuters’ Andy Home sounded the alarm bells on this issue. However, we here at MetalMiner remain more skeptical.
The email from an associate in China, who has extensive experience in that country’s aluminum industry sent an overview with the headline, “New law in China to hit global aluminum market.” Andy Home undoubtedly received the same information.
The basics of the situation include the following:
- China [may have] implemented a new law starting January 1, 2016 that bans the import, sale or burning of “unqualified” petcoke.
- Petcoke is an essential raw material used to make aluminum.
- There is no clarity as to what will be considered “unqualified” petcoke. “Unqualified” pertains to the sulphur content. If a 3% sulfur (and up) standard is adopted, the thought is that there could be severe ramifications to the aluminum industry. If a 5% sulfur standard is considered “unqualified” then there will be a much smaller impact.
Is China Really Tackling Its Greenhouse Gases?
Without a doubt, petcoke yields more greenhouse gas emissions than its cousin coal. And China, for obvious reasons, wants to clean up its environment. Limits to the sale and usage of petcoke represent as logical an opportunity as any to help reduce harmful pollutants.
Time and again we’ve heard China say that they want to clean up their environment. And yet the country’s actions suggest otherwise.
Therefore, we fail to understand how one could draw the conclusion that the aluminum market would actually be harmed and some sort of supply shortage might ensue.
This is part 1 of a 2-part series on Chinese petcoke and what a potential ban might mean. Check in tomorrow for part 2!